EU trade deal: What to expect in markets & earnings this week

Yahoo

29-07-2025

Stocks (^GSPC, ^IXIC, ^DJI) are higher as investors look past tariff headlines and focus on upcoming tech earnings from giants like Apple (AAPL) and Microsoft (MSFT).
Yahoo Finance Senior Reporters Brooke DiPalma, Josh Schafer, and Allie Canal explain what easing EU tariffs mean for liquor stocks and how market euphoria is shaping investor sentiment.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
Brooke, let's start with you, because as we've been talking about in recent days, we don't necessarily see a one-to-one correlation between these trade headlines anymore and the broader market. But certainly, we do see individual stocks and individual sectors that are more directly impacted by all of this, that are seeing a movement, and that includes some of the industries that you cover.
Yeah, absolutely. What we're seeing here is stocks roughly flat, and, uh, you're, Danny, saying in a note this morning that the financial markets anticipated the latest deal and the reaction to it is likely to be relatively muted this week. Of course, investors are thinking big picture here. They're not just now uh solely focusing on these latest trade deals, especially with the EU, but rather, they're looking out to these tech earnings, which will be, you know, worth $11 trillion of companies like Microsoft, Apple, Amazon, as well as Meta here. And really, what they're looking forward to is these companies reporting their really, their outlook for what this could look like at the rest of the year. Is Apple able to overcome these latest uh trade headlines? Will they be able to to ultimately get in on this AI revolution? And ultimately, will their earnings beat despite all this noise that they have been in focus over the past second quarterly reports? Of course, in addition to that, once again, AI will be in focus. And largely, what we've seen here is just this push away of investors solely focusing on these trade headlines, but rather focusing on exactly how companies, key key companies like Delta, like Levi's, as well as others, including Starbucks this week, have been able to overcome this environment with so much uncertainty, especially around the consumer.
Hey, Brooke, so talk to me about the um liquor companies here this morning and and the action that we're seeing there.
Yeah, what we're really hearing from key consumer groups around the spirits, as well as wine, is this hope that we're going to see the zero to zero tariff. Of course, Brown-Forman, Diageo, Pernod Ricard, those were companies that were uh concerned about that 100% EU tariff that was speculated to go into effect. Now they're hoping for those to sort of back down. And investors are certainly trying to understand and digest, you know, in this new environment where we're looking more at that 15% baseline, they're also at the same time hoping that that tariff comes down to zero for key distillery companies like a Brown-Forman, ultimately, that whiskey headline that went into uh that made headlines rather a few months ago where there was lots of nerve about the 100% uh tariff rather. Now we're seeing that slowly fear sort of go away.
Um and, you know, when we talk about also the sort of earnings optimism that's in the background, even with the trade stuff at the forefront, I guess, Josh, that's one of the reasons that we saw John Stoltzfus already a big bull got a little more bullish.
Yeah, so John Stoltzfus over at Oppenheimer, Julie, the chief strategist over there, coming back out and saying 7,100 for the year end for the S&P 500. Now, that was his previous target before the April tariff turmoil that sort of sent us way down, right? S&P 500 fell 19%. Picked a trough there, but he came out on Sunday night. Now saying 7,100, he is at the top of the chart that you're looking at on your screen there. Stoltzfus saying earnings per share of about $270 to $275 this year, a PE of nearly 26 times next 12 months earnings, which should be uh quite highly valued and something that we talk about quite a lot here. But Stoltzfus is essentially arguing that with most of the trade uncertainty now passed, you take a look at these earnings, as Brooke was sort of just hitting on, you look at the guidance that you've seen over the next six months, even into 2026. I was looking through some of the FactSet numbers over the weekend. I mean, over the last month, you've had earnings estimates for the next two quarters and the next year actually move higher. So when you think about what these tariffs are meaning for corporate profits, they're not expected to really compress corporate profits, at least at this point. Remember, we're only a third of the way through earnings season. But someone like Stoltzfus takes a look at what he's seeing in the market with the rally and seeing sort of this bubbling continued to brew higher, right? I hate to use the word bubble, but starting to brew a little bit higher. And he says, all right, I think the market can continue to trade at a high multiple and probably be supported as well by some continued earnings growth through the end of the year.
I think we can use the word bubble sometimes, Josh. It's okay. I mean, Allie, um, you used the word euphoria, uh, which I think is another version, right, of of bubble and whether we're seeing bubble behavior. You looked into that in uh a story you wrote over the weekend. And, you know, there is this view of what Josh is saying and what John Stoltzfus is saying that there is earnings growth to actually back it up. But what were the folks that you were talking to saying?
Yeah, so Citi has a great indicator. It's called the Levkovich Index. And this is based on hard economic data and really stats out there in the market. So margin levels, short interest, and options pricing. Now, that hit a level of 0.65 on Friday. Now, this was above the 0.49 that was seen in the week prior. And the threshold there is 0.38. That signals euphoria. And we've seen in the past that markets can really trade in this euphoric territory for a long time. The problem is, is that when you have a lot of optimism in the market, that makes the fall, the eventual fall hurt a lot more. And that is something that I spoke with uh Citi analyst, Drew Pettit about. And he told me that, you know, at this current moment, we have speculative trading, we have the rise of meme stocks. All of that is making strategists a little bit on edge about how optimistic markets currently are. At the same time, though, when we talk about this bubble activity, this behavior in from the part of investors, if you look back in history at the dot-com bubble, what we saw in 2021, we're in a different spot today. And a large part of that is because of the earnings growth that you mentioned. That's not to say that there aren't some cracks underneath the surface, particularly when we look at some of those consumer names that are more exposed to lower income consumers. We have seen some softness in demand there. But overall, we are seeing solid beats. According to FactSet, we're continuing to rise when it comes to long-term earnings growth, not just for 2025, but also 2026 and beyond. So that is all leading to a lot of the optimism that you're seeing in markets right now and also a lot of the analyst price targets uh that we continue to chase higher and higher as we continue to see these record highs.